At some point in the life of a small to medium sized business it’s likely that its owner-manager will undertake a major business transaction. One such transaction would be looking for a trade partner.

Written by Stephen Harris, corporate finance Director at Mazars.

Steps should be taken to ensure that your business is in good shape to attract potential partners.  First impressions are extremely important but establishing where the company is looking to go is just as crucial.

The considerations for a business looking to attract trade partners can be split into three areas:

•    controlling intellectual property (IP)
•    what to look for in a partner
•    ensuring business performance throughout the transaction

Controlling intellectual property (IP)

Protecting your company’s IP is vital for keeping its value.  Some of the world’s largest international businesses have been built on a single or series of good ideas or designs, so IP can be a business’ greatest asset.  It could prove the reason why another a company chooses to partner with one business over another.

IP can either be formally protected by patent or informally covered by managing it as an intellectual asset.  Patenting does not automatically provide international IP protection, so it’s important to treat each region separately.

Informal IP protection avoids disclosing too much information and is far less costly.  Following the ISO 9001 best practice guidelines means that by documenting enough information, a company’s intellectual capital can be sold effectively to the buyer.

At the same time it’s vital to acknowledge the element of skill and talent within the business, which makes processes run smoothly.  Key members of staff support a company’s value.

What to look for in a partner

Not all businesses will have the luxury of relying on specific knowledge, expertise or intellectual property to attract investors.  So how should businesses go about finding potential partners?  What capabilities should they look for and how do they ensure that they are deriving full value from the partnership?

Businesses looking for trade partners are generally looking for something that they can’t sensibly provide themselves.  It might be an international distribution network, market expertise, or additional software applications.

Trade partnering requires that owner-managers be clear what they want from the relationship.  Understanding your business model and the attractiveness of the products/services you are offering will go a long way to leveraging sustainable and valuable trade partnerships.

Ensuring business performance throughout the transaction

Agreeing these types of partnerships can be lucrative for both parties, but the process needs to be handled with considerable planning.  Speak to an expert to ensure that the business model stands up to the scrutiny of another party.  Advisors will be able to provide tips on how a business can protect its assets.  Similarly, do your own due diligence on any potential business partner.  Can they deliver on what they say – both before and throughout the relationship?

Possibly the most important point to remember during negotiations is that a business still needs to be run. 

•    Involve other members of the organisation in the process if support is needed, and provide easy-to-implement plans that ensure seamless management throughout the transaction
•    Don’t assume that the transaction will take place and at all times maintain a balanced level of communication with your staff
•    Tell your staff you intend to partner with another organisation well before the deal

Leaving a deal an absolute secret until the ink is dry may cause unrest and if the deal falls through could leave you without your employees’ support.  Remember at all times that your employees are one of your biggest assets and should be treated as such.

Mazars.co.uk

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